More info on Unicom. Not being spun very well.
(And I liked the Patton speech.)
05/24 (WJ) AWSJ: China's Unicom May Not Act On Mobile Plan
By Matt Forney and Peter Wonacott
Staff Reporters
A Chinese telephone company slated for one of the country's largest stock
listings appears unlikely to deploy a mobile-phone technology it agreed to
license from a U.S. company.
The trouble with the new technology is just one of many problems that China
United Telecommunications Corp., or Unicom as it is widely known, has faced in
recent years. In six years of existence, Unicom has gone through four
chairmen. The government forced it to break ties with more than 20 foreign
investors. Even Premier Zhu Rongji, the company's top political backer,
criticized it live on national television for failing to coordinate with its
government overseers.
Access Represented
Unicom reached a "framework agreement" in February with San Diego,
California-based Qualcomm Corp. Unicom was to license Qualcomm's technology,
called CDMA, to build a nationwide mobile-phone network for 10 million
subscribers by the end of this year. The deal would have given Qualcomm access to the world's third-biggest mobile-phone market.
Within a week of the agreement, however, the Chinese government ordered
Unicom to delay its plans. Now, it appears the deal with Qualcomm is
imperiled. In a registration statement filed with the Securities and Exchange
Commission in Washington on May 12, Unicom mentions CDMA only in passing as
something approved by the government that "we are currently exploring." The
document never mentions Qualcomm.
An investment banker involved in Unicom's stock offering, said at this point
Unicom "does not have any plans to build CDMA." The company "feels it missed
its chance." Unicom and Qualcomm both declined to comment for this article.
Since February, evidence has mounted that Unicom wouldn't act on its
agreement with Qualcomm. For one thing, Unicom already operates a mobile
network that uses a different, incompatible technology called GSM. That GSM
network has roughly five million subscribers and is still expanding its
capacity by 200,000 subscribers a week - a waste of money if Unicom plans to
roll out CDMA instead.
In addition, the world will move to new, "third generation" standards in as
little as two years, driving the proposed "second generation" CDMA network
toward obsolescence. Critics in China increasingly argue against building an
expensive new system for such a short period. Even Unicom executives privately
doubt the wisdom of building a CDMA system now, people close to the company
say.
On the Road
Unicom executives will have to elaborate on their Qualcomm agreement during
their roadshow, which starts Monday. The company hopes to raise $4 billion in
stock sales in New York and Hong Kong starting June 21 and 22 through its Hong
Kong-based listing vehicle, China Unicom (Hong Kong) Group Ltd. Three years
ago, its rival China Telecom (HK) raised $4.2 billion in its overseas stock
listing. Now, Beijing needs a Unicom success to stoke interest for other state
enterprises it plans to list on overseas markets.
What Unicom has going for it is scarcity - as one of the only two major
telephone companies in China, it faces limited competition. And with Chinese phone companies still off limits to foreign investors, China Unicom will
become one of only two such concerns with shares offered overseas.
The government created Unicom in 1994 to spur competition, which until then
was nonexistent. The new company immediately ran into conflict with the former
monopoly that it aimed to displace, China Telecom. China Telecom charged
exorbitant fees to route its competitor's calls through its nationwide
network, and often flatly refused to accept calls from Unicom, according to
industry executives. With Unicom's overseas listing pending, the government
demanded that China Telecom cooperate more with its start-up rival. By many
accounts, Unicom's access has improved. "I think the Chinese government in the
last year or so has given Unicom greater support than in the past," says
Arthur Kobler, president of AT&T China Inc.
Unicom's initial efforts to raise money from overseas investors ended
dismally. Chinese law forbids foreign firms from operating phone companies.
Unicom, however, entered into complex arrangements in which foreign companies
formed joint ventures with Chinese partners that built networks and leased
them to Unicom. After the foreigners invested more than a billion dollars, the
government deemed the arrangements illegal and forced Unicom to repay the investors. Negotiations were often bitter, but were resolved in time for the
public offering. "We didn't get what we thought we would have through
long-term development, but we're satisfied," says Mark Hauf, CEO of Asian
American Telecommunications Corp., which invested more than $100 million in
such a venture. Compensating former partners will cost Unicom. It plans to
take a $145 million one-time charge to earnings this year, and must issue
stock warrants, or rights to buy its shares, to some of them.
With the stock offer, Unicom hopes to put its cash problems behind it. The
listing aims to raise about one-third of what is needed for a $12 billion
business expansion plan. Unicom competes most strongly in mobile phones
services. Its 4.2 million subscribers at the end of 1999 comprise a huge base,
and last year its market share doubled to 14%. Remaining subscribers belong to
Unicom's competitor, China Mobile, which spun off a year ago from China
Telecom. Unicom also operates the biggest paging operation in China, with 43.5
million subscribers at the end of last year.
(END) DOW JONES NEWS 05-24-00
Sorry about the formatting -- can't find a link anywhere... |
